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The Fed’s Recent “Not QE” Is “Not Working” and People Are Starting to Notice - Nathan McDonald (13/12/2019)

The
alarm bells are ringing all across the financial industry, and the mainstream
media is finally starting to take notice of just how big a mess the repo
markets truly are.

The
Federal Reserve have been tossing money at the repo markets since riding in on
their white horses in mid-September, hoping to stabilize and fix the problems
that are ailing it. Unfortunately for them, things don't appear to be getting any
better but are, in fact, worse.

Just
like after the 2008 crisis, banks are seemingly uncomfortable lending money to
this space, and the strain is starting to be felt. The Federal Reserve has been
forced to balloon their balance sheet once again, throwing over
$300 billion at the repo markets
in just three short months.

I
have been watching this train wreck unfold since it began and have written numerous
articles on how the Fed's statement that this is "not QE" is
completely and utterly laughable. The expansion of their balance sheet is
happening at such a rapid velocity that it is now occurring at a faster rate
than the immediate months following the
announcement of QE2 and QE3!

This
is truly staggering, and the fact that the mainstream media is only now taking
notice indicates just how asleep at the wheel they have been for the past three
months, blissfully content with the Fed printing copious amounts of money out
of thin air and dousing the raging flames that have seemingly engulfed the
vital overnight repo markets—markets that help keep the treasury markets and so
many others operating smoothly on a daily basis.

However,
they are asleep no longer. A quick
Google search reveals a head-spinning amount
of articles covering the repo market mess.

Everyone—and
I mean everyone—seems to have now caught on to what is unfolding, and they are
worried.

This
is leading many to speculate that
QE4 may soon be on the way, possibly even
before the year ends. That's how dire things have become.

“If we’re right about funding stresses, the Fed will be doing ‘QE4’ by
year-end,” Pozsar wrote. “Treasury yields can spike into year-end, and the Fed
will have to shift from buying bills to buying what’s on sale—coupons.”

"Others see QE4 happening sooner rather than later. In a research
report this week, Credit Suisse analyst Zoltan Pozsar told investors that, in
order to calm short-term funding markets, the Fed will need to
implement another round of quantitative easing “by year-end”—which is
only three weeks away."

Other
articles written by Barron’s, The Washington Post, and countless other sources all
seem to agree that whatever is currently unfolding in the repo markets is not
good and a more serious approach is needed, and needed soon.

Call
it what they want. However, I believe history will show that QE4 is not going
to begin at the end of 2019, nor the beginning of 2020, nor even later that
year—because it has already begun.

QE4
began with the Federal Reserve’s massive injections into the repo markets in
September 2019, despite the Fed's absurd claim that an accumulation of over
$300 billion in debt within three months is "not QE".

The
question is, how much more will they accumulate? How much more before they can
put out this debt garbage fire, and how many more digital, fiat dollars will be
created out of thin air before the pain stops?

Who
knows? But one thing I do know is that this isn't over yet. Far from it.

Keep
stacking.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world.
He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

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